Revenue, Costs and Profit Flashcards
What is Revenue? How can it be calculated?
the income earned by a business.
Revenue = Sales * Price
What are Costs?
Expenses Paid out to Run the business
What is a Fixed cost?
it doesn’t vary without output. It has to be paid even if firm produces nothing.
e.g. rent, insurance and fixed salaries.
What is a Variable cost?
costs that will increase as the firm expands output.
e.g. factory labour, raw materials and running machinery.
How do you work out the Total Costs?
Variable costs + Fixed costs
What is an Average Unit Cost?
how much each product costs to make.
How to work out Average Unit costs?
Divide total cost by number of products made.
average unit cost = total cost/output
How do businesses make a profit?
Earn more than they spend
How do you calculate Profit?
Profit = revenue - costs
What happens when the costs are more than the revenue?
business will make a loss
